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The Sixth Philosophy: If you fail to plan, you plan to fail

By Jimmy Turner, MD
The Physician Philosopher

“If you fail to plan, you plan to fail!”  ~ Benjamin Franklin

One of the biggest keys to success in any financial plan is actually attempting to make the plan.  Seems obvious, but a lot of people fail to make a financial plan.  They set course to sail to a destination without bringing directions.  How do you expect to get there? (Where is “there” anyway?)  Similarly, a financial plan is required to know how to get to where you are going and what to do when your financial ship meets turbulent water.  Sticking to the plan (likely the most important philosophy, to come later) cannot happen if you don’t have a plan in the first place.  You can see some of my goals from my plan in my post on The Physician Philosopher Manifesto.Fire Your Advisor   Truthfully, if you want to make a financial plan you will likely pay a (fee-only) financial advisor $2000-5000.  That’s a lot of money.  Instead you could use a product made by White Coat Investor called “Fire Your Financial Planner,” which will literally walk you through the entire process.   It will walk you through the entire process including debt management, saving for college (for kids), investment asset allocation, estate planning.  It is really the whole nine yards.  I’ve gone through the whole Fire Your Financial Planner course myself and it really is comprehensive.  Even if you feel that you need a financial advisor after going through the course, White Coat Investor walks you through how to tell a good one from a bad one (do you know the difference between fee-only and fee-based?).

Setting a Goal

Your financial plan should include several components.  Before we get to those, let’s first discuss some basics.  Each part of your financial plan should be as specific as possible.  You should also be able to obtain it and put a date on it as I did in my Manifesto linked above.  Don’t simply say, “I am going to be a millionaire.”  Instead, you should say, “I’ll be a net worth millionaire by 8 years out of residency on July 1st, 2025.”  Make a plan, set a date, and achieve your goal.

Parts of the Plan

This is not an all inclusive list.  That said, here are the absolutely essential parts of the plan.
  1. Destroying Debt:  Again, be specific.  How much will you contribute to debt each year?  When will you be free from your student loan debt?  Mortgage? Consumer debt (if you have any)?
  2. Building wealth:  How much of your AGI will you contribute to investments each year?  At what age will you have $100,000?  What about $1,000,000?
  3. Retirement Goal:  How much money is enough money for you to retire (typically 25 x your annual spending for retirement, unless your retirement will be longer than 25 years)?  By what age will you get there?
  4. Insurance:  How much insurance will you carry?  Which kinds of insurance (malpractice, disability, umbrella, life, house, car, any others)?  Will you always carry all of these policies?  At what age should you be able to shed some of them?
  5. Philosophical Plan: What are you trying to achieve with your plan?  FIRE (Financial Independence Retire Early)?  Security? What will you do when the market goes down?  What kind of investments will you make (hopefully non-actively managed low-cost index mutual funds)?  How much assets into each class?  Stock/Bond ratio?  How often will you rebalance, reassess, and make changes?

More to come…

I hope that through this website and the the other websites, books, and products I recommend you may be able to produce a strong financial plan.  The more comprehensive the plan, the better and more likely you are to achieve your results!  After all, as Mr. Franklin said, “If you fail to plan, you plan to fail!” Truthfully, if you want to make a financial plan you will likely pay a (fee-only) financial advisor $2000-5000.  That’s a lot of money.  Instead you could use a product made by White Coat Investor called “Fire Your Financial Planner,” which will literally walk you through the entire process.   It will walk you through the entire process including debt management, saving for college (for kids), investment asset allocation, estate planning.  It is really the whole nine yards.  I’ve gone through the whole Fire Your Financial Planner course myself and it really is comprehensive.  Even if you feel that you need a financial advisor after going through the course, White Coat Investor walks you through how to tell a good one from a bad one (do you know the difference between fee-only and fee-based?).  

Have you made a financial plan?  Do you need help with one?  Have you asked a financial advisor (fee-only) how much that would cost?  What are your tips and recommendations? Leave a comment.

TPP

3 Comments

  1. Mrs. Adventure Rich

    I’ve missed the first few in this series… looks like I need to go back & check them out! We have always been DIY with our financial planning, but we aren’t too complicated either 🙂

    Reply
    • ThePhysicianPhilosopher

      I think the idea that “finances need to be complicated” is one of the great lies propogated by the financial industry to make people feel like they can’t do it themselves! I encourage people regularly in my every day life to take a look and see how it can be made simple so that DIY finance isn’t so overwhelming.

      Thanks for stopping by and leaving a comment!

      Reply

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